Definition: What is the Interest Coverage Ratio?
Interest Coverage Ratio is the financial ratio which measures the ability of the company to make the interest payment on its debt in a timely manner.
Investors use this ratio to measure the profitability and risk of the company. Creditor uses Interest Coverage Ratio to analyze whether the company is able to support the additional debt or not.
If the company can’t pay the interest on the debt then such type of company cannot pay the principal amount. So to find the risk involving in lending Interest coverage ratio is used.
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